Falcon Cable Transfer Agreement
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CORPORATE HEADQUARTERS
10900 Wilshire Boulevard . 15th Floor . Los Angeles, California 90024
Tel 310.824.9990 . Fax 310.208.3655 . www.falconcable.com
September 18, 1998
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Falcon@
VIA FEDERAL EXPRESS
Mr. Jay Baksa
City Manager
City of Gilroy
7351 Rosanna Street
Gilroy, CA 95020
Re: Transfer Agreement with the City of Gilroy
Dear Mr. Baksa
Enclosed please find two originals of the Transfer Agreement between the City of Gilroy (the
"City"), on the one hand, and Falcon Cable Systems Company II, L.P. and its present and future
parent entities (collectively, "Falcon"), on the other hand, signed on behalf of Falcon. The
Transfer Agreement contains some significant benefits for the City, including our commitment to
approximately $3,000,000.00 in PEG and I-NET related expenditures. We are pleased that we
were able to work out these issues to both parties' mutual satisfaction.
As our attorney informed Sue Buske yesterday, the only issue that had not been approved on our
end was the amount ofthe City's costs to be paid by Falcon pursuant to Section 7.1(iii) of the
Transfer Agreement. We were not made aware of this amount untillate yesterday.
Falcon's position from the start has been that it would consider reimbursing franchising
authorities from which it needed to obtain consents for any reasonable costs incurred by them in
connection with a requested transfer. With regard to the pending transaction, Falcon has
requested consents from over one hundred franchising authorities. Due to the nature of this
transaction (i.e., no transfer of the franchise, no change in control of the franchisee, no changes in
local, regional, or national management, etc.), only a handful of jurisdictions requested any
reimbursement at all. The few that did request reimbursement asked for very nominal amounts,
never totaling as much as 10% of what is being requested in the Transfer Agreements.
As you probably are aware, Falcon has received legal opinions that out of the four jurisdictions
represented by Sue in these negotiations, it needed to obtain consent with respect to, at most,
approximately 400 subscribers. Even assuming that were not the case, if we were to view this as
a situation involving the need to obtain consents from all four jurisdictions (as Sue has suggested
we do), there still was only one negotiation, involving a form of agreement that was substantially
Your Access to Entertainment, Information and Beyond @
to ,,' ..
Ms. Sue Buske
September 18, 1998
Page 2
similar to that which was entered into by the parties in 1996. In that context, we find a request
for reimbursement of costs which, in the aggregate, exceeds $30,000.00 to be far above what
could be considered reasonable under the circumstances.
This afternoon, we presented Sue Buske with two alternative proposals: (i) that the
reimbursement requirement be substantially reduced, or (ii) that Falcon agree to bear the costs
but have the express right to pass them through to its subscribers. We were unable to come to an
agreement on this issue. Given the time constraints, the fact that the parties obviously were far
apart on this issue, and the fact that both I and our outside counsel handling this matter will be
observing the Jewish New Year on Monday, we elected to handle it by modifying Section 3.2 of
the Transfer Agreement to provide Falcon with the right to pass through these costs to its
subscribers in the City and in the other communities represented by Sue. While no final decision
has been made by Falcon to pass these costs through in this manner, we believe we have the right to
do so under applicable law, and are not willing to waive that right. Given the benefits that will
accrue to the City's subscribers as a result of the Transfer Agreement, we felt this was the most
equitable way to handle this matter.
Assuming this arrangement meets with your approval, please return one fully executed original
of the Transfer Agreement to me at this office. While we are delivering the initial payment
called for under Section 7.1 (iii) as we have been requested by Sue, please be advised that such
delivery is subject to the City's and the other jurisdictions' agreements to the terms of their
respective Transfer Agreements as they have been modified by us. Until a fully executed
original of each such Transfer Agreement has been returned to us, the City is not authorized to
negotiate the check, and if it does so, it will be deemed by Falcon to be an advance payment of
franchise fees which may otherwise become due.
Very truly yours,
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Howard Gan
Vice President
cc: Sue Buske, The Buske Group
February 18, 1982
Mr. Fred Wood
City Manager of Gilroy
PO Box 56
Gilroy, CA 95020
Dear Mr. Wood,
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In accordance with your resolution transferring the CATV franchise
from Falcon Communications to Falcon Cable TV of Northern California,
this letter will serve as our agreement to comply with all provisions
of the ftxisting ,franchise.
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FALPRO CORPORATION
cc: Bruce Jacobs, City Attorney
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FALCON COMMUNICATIONS 10889 Wilshire Boulevard, Suite 1260, Los Angeles, California 90024 (213) 208-8177